Bartz was brought in to turn around Yahoo, which has lost a huge share of the search audience and has struggled to find a base of advertisers willing to support the content it provides.
Some things have turned around: The stock is now wobbling at around $15 up from $12-and-change when she was hired. Revenue, however, is flat -- up just 1 percent in Q1 2010 to $1.6 billion. Marketing services revenues were down sequentially from the previous quarter.
It's not at all clear that web advertising will buoy Yahoo in the long term, as online advertising tends to drive down advertiser costs because it's so efficient, and because there's an oversupply of sites offering space. Take a look at ValueClick (VCLK), a pure online ad business. It should be enjoying the economic recovery but its revenues for Q1 2010 were $95.7 million, down from $103m.
Yahoo's net income nearly tripled to $312 million last quarter. That looks like progress until you examine where that extra profit came from: cuts. Bartz took tens of millions out of Yahoo's operating expenses, from all divisions. Her guidance indicates she will continue on the same path, with expenses trending down. So Bartz seems to be cutting her way to success, rather than investing in its day-to-day business.
Yahoo's strategic efforts raise as many doubts about the company's future as they offer promises. It's recently begun hiring journalists to put out its own brand-name news content. Aol has done the same thing. And while Aol's product is well-received by readers,* it's incredibly difficult to make money from news content. Beefing up the news offering is an idea from 1996, and will likely see the same fate as all those dot coms that went bust in 2000 and 2001 when they tried to do the same thing.
On the search side, Bartz celebrated this achievement in her earnings release:
Yahoo! received regulatory clearance for its search agreement with Microsoft from both the U.S. Department of Justice and the European Commission. The companies commenced implementation of the agreement on February 23, 2010.The agreement lets Microsoft (MSFT) operate Yahoo's search operations in return for a fee. The problem is that Microsoft's Bing search engine is turning out to be Yahoo's main enemy -- Bing is stealing Yahoo's share, and neither are making a significant dent on Google.
One is tempted to conclude that Bartz has turned Yahoo into Aol, with the added disadvantage of having its search operations controlled by its main competitor.
Image by Flickr user aresauburn, CC.